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Egypt drops cash cover requirement on sugar import, to boost local demand

To fight supply shortages the Central Bank of Egypt exempted 50 per cent cover requirement on sugar imports for a 6 months period

Reuters, Sunday 19 Dec 2010
Loan by $ 1.6 billion to Bangladesh to boost oil imports, provided by the Islamic development Bank. (photo: Reuters)

It was exempting banks from a 50 per cent cash cover requirement on sugar imports for a period of six months, a move that should spur imports and help tackle food price inflation, Egypt`s central bank said.

Egypt's core annual inflation, which strips out subsidised goods and volatile items including fruit and vegetables, accelerated to 8.58 per cent in the year to November, its highest level in 19 months.

"The Egyptian Central Bank decided to allow banks to exempt the import of sugar from the minimum cash cover ratio, currently at 50 percent, leaving banks the freedom to determine the percentage of the cover, and with no minimum, for a period of six months," the Central Bank said in a statement.

The bank had already lowered its sugar import cash cover requirement from 100 per cent in June, and then exempted meat and poultry importers from holding cash to cover such purchases on October 2.

Sugar and meat were the main drivers of higher inflation for most of 2010, due to supply shortages.

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